Electric vehicles don’t need subsidies now, says transport minister Nitin Gadkari

A day after heavy industries minister H.D. Kumaraswamy said the government is expected to finalize the third phase of its flagship electric mobility adoption scheme in a month or two, minister for transport and highways Nitin Gadkari stated that subsidies for electric vehicles (EVs) may no longer be necessary for consumers.

“My personal belief is now we don’t need too much subsidies. The GST (goods and services tax) on a petrol, diesel vehicles is 48%; the GST on an electric vehicle is only 5%. Still, after getting 5% GST, if someone is expecting subsidy from the government, my honest opinion is now we don't need subsidies,” Gadkari said while addressing a green mobility convention in the national capital Thursday.

He emphasized that Indian consumers no longer need incentives to purchase EVs, citing decreasing battery costs and growing adoption, which are expected to make EVs more affordable. Gadkari also projected that electric vehicles will reach price parity with internal combustion engine (ICE) vehicles within two years.

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Gadkari highlighted the significant drop in the cost of lithium-ion batteries, which has decreased from $150 per kilowatt-hour to $107-108 per kilowatt-hour. Data from the International Energy Association’s Global EV Outlook 2024 shows that battery prices have been declining since 2015.

“Now, five companies are starting lithium-ion battery (production),” Gadkari added, referring to manufacturers benefiting from the government's production-linked incentive for advanced chemistry cells (PLI-ACC). "I feel that within two years, the cost will come up to $90, and when it will come to $90, the cost of the petrol-diesel vehicle and the cost of an electric vehicle will be the same," he said.

He noted that once price parity is achieved, the significantly lower fuel costs of EVs compared to ICE vehicles would serve as sufficient motivation for consumers to switch to electric vehicles.

Not-so-electric sales

Despite the government's ambitious goal of achieving 30% EV penetration by 2030, adoption remains slow for both two- and four-wheeler EVs. Data from the heavy industries ministry in August 2023 revealed that since 2018, only 5.28% of all two-wheelers sold in India were electric models, while just 1.99% of four-wheelers sold were electric. 

Furthermore, sales of three-wheeler e-rickshaws saw a nearly 21% year-on-year decline in the quarter ended June, according to data from the Society of Indian Automotive Manufacturers (SIAM). The government’s Vaahan dashboard also showed a 16% year-on-year drop in EV sales for August.

On Wednesday, Kumaraswamy, a key member of the NDA coalition partner Janata Dal (Secular), said that an inter-ministerial group is working on feedback for the FAME scheme for EVs, aiming to address challenges encountered during the first two phases.

The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme was launched in 2019 with an initial outlay of ₹10,000 crore for three years, later extended until March 2024 with an additional ₹1,500 crore allocated.

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Currently, the government's Electric Mobility Promotion Scheme (EMPS) provides EVs at a subsidized cost to consumers, with manufacturers being reimbursed by the government. However, EMPS is set to expire in September.